BALANCE OF PAYMENT AND BALANCE OF TRADE.
Hey Guyz, Happy Monday. How was the weekend, mine
was cute, hope yours was lovely? Any way this is a new week and a new day to
live, learn and have fun. So let’s get started.
Balance
of Trade is the relationship between the values of a country’s
import and export of visible items within a particular period of time.
If Visible Exports are more than Visible Imports,
the Balance of Trade is said to be favorable. On the other hand, if the Visible
Import exceeds the Visible Exports, the country is said to have unfavorable
Balance of Trade.
Balance
of Payment is a statement/record showing the
relation between a country’s total payment to other countries and its total
receipt from other countries in a year. In other words, it is the comparison of
the sum total of a country’s receipt from export and the total payment made for
import. Balance of Payment of a country shows the yearly statement of income
and expenditure from visible and invisible export, and visible and invisible
import respectively.
A Country’s Balance of Payment can be divided into
three parts:
b. Capital
Account.
c. Monetary
Movement Account.
CURRENT
ACCOUNT.
They are the
expenditure and income of a country on both visible and invisible imports and
exports.
CAPITAL
ACCOUNT.
This is concerned with
the inflow and outflow of capital both long and short terms.
MONETARY
MOVEMENT ACCOUNT.
It shows how the
balance of both the current and capital accounts are settled.
FAVOURABLE AND
UNFAVOURABLE BALANCE OF PAYMENT.
Favourable Balance of
Payment occurs when the visible and invisible export trade is greater than the
payments to other countries on invisible and visible import trade.
Unfavourable Balance of
Payment is when the payments on visible and invisible imports is greater than
receipts on visible and invisible exports. It can be referred to Deficit
Balance.
Tariffs are taxes
imposed on imported goods either as a percentage of value or a unit. It is
referred to as Import Duties.
REASONS
FOR IMPOSITION OF TARIFFS.
1. To
Protect Infant Industries from Foreign Firms.
2. To
Raise Revenue through Import Duties.
3. To
correct unfavorable Balance of Payments of a Country by imposing Tariffs on
importation of goods which will discourage importation.
TOOLS
FOR TRADE RESTRICTIONS.
1. Imposing
Tax on Imported Goods.
2. By
Lowering the value of a country’s currency with respect to other import,
becomes costly while export will be cheaper.
3. Prohibition/
Outright can be placed on some imported goods.
4. Restricting
on the quantity of goods that can be imported from a particular country.
This concludes our session
for today, Hope you understand what we discussed today. Until we meet again, remain
ever blessed and remember you are for SIGNS & WONDERS. God Bless You.
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